AUDITORS’ AND
MANAGEMENT
AUDITORS’
RESPONSIBILITY TO FRAUD AND ERROR:
When
planning the audit, auditors should assess the risk that fraud or error may
cause the financial statements to contain material misstatements. Based on this
risk assessment, auditors should design their procedures so that they have a
reasonable expectation of detecting material misstatements arising from fraud
or error.
MANAGEMENT RESPONSIBILITY TO FRAUD AND ERROR:
Responsibility
for the prevention and detection of fraud rests with the management and those
charged with governance.
They
should create a culture of ethics and honesty within the entity.
This
culture should be actively reinforced by active oversight by those charged with
governance by:
·
Considering
the potential for controls to be over-ridden
·
Considering
other inappropriate practices eg aggressive earnings management
NOTE: It is more difficult to detect misstatements arising from
fraud rather than from error
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